Brough's writings on the technology, economic and social issues of communications at the intersection of the Internet, telecom and mobility.

June 11, 2007

Lifetime Prepaid — Paying a Little Extra to Reduce Hassles

Mobile Pundit pointed out this Economic Times article on a TRAI study of the first six months experience with “Lifetime prepaid” services in India. Service adoption has been different than expected but, with hindsight :-), it makes perfect sense to me.

The original premise for lifetime prepaid was that poor people would be able to get a phone with which they could receive calls even if they couldn’t afford to make outgoing calls. Since India is a caller-pays country, a laundry man, a paper recycler, or any other small time entrepreneur, would be able to advertise a phone number and receive calls from customers.

But the TRAI study found subscribers to Lifetime Prepaid services are not much different than any other subscriber. 72% recharge their phones every month and ARPU for lifetime prepaid subscribers is Rs 218 (~US$5.37) versus RS 261 (~US$6.43) for normal prepaid subscribers. Yes, lifetime prepaid has tapped new customers, but it’s appeal is much broader than just the poor. And this despite the fact that lifetime prepaid costs slightly more per minute for outgoing calls (Re.0.80 vs. Re.0.77) than regular prepaid.

The appeal here is the reduction in uncertainty. It’s well established that people will pay extra to not have to worry about things. That’s the reason monthly subscribers in the US buy bundles of minutes for much more than their actual monthly costs would be if they paid by the minute.

With lifetime prepaid you know you will keep the same phone number, even if something happened and you couldn’t afford to recharge your phone for a while. If you’re middle class and want your driver and other servants to be reachable, here’s the perfect plan — you can get them phones and not worry about maintaining their service for them. And if you live outside of India but want a phone for your twice yearly visits, what better way? At every economic level, people want to reduce hassles in their lives and are willing to pay a bit extra for the privilege.